Managing the financial health of your business during COVID-19 - PowerPoint PPT Presentation

Managing the financial health of your business during COVID-19 Gavin Stuart | Partner 27 May 2020

Directors’ duties – the same or changed? 1 Directors are still required to discharge their duties in the same manner as they did before COVID-19. Fiduciary relationship the same 2 Common law and statutory duties: • Act with care and diligence of reasonable person in same position • Act in good faith in best interests of the company and proper purpose • Must not improperly use position or information to gain a personal advantage or cause a detriment to the company 2

Directors’ duties – the same or changed? 3 General duty to prevent insolvent trading by a company remains in place 4 As do the general defences: • Expectation and belief about company’s solvency • Director did not take part in management of company 5 Director’s liability remains for failing to comply with ATO requirements − such as PAYG, SGC and GST 3

Directors’ duties – the same or changed? 6 Despite the COVID-19 period, ASIC has indicated that it will maintain enforcement activities where the public interest warrants action be taken. • Risk of significant consumer harm • Serious breaches of the law • Risks to market integrity • Time critical matters 7 Reforms and concessions: • Are not a ‘free pass’ for directors • Are temporary • Apply only if certain conditions are met 4

COVID-19 moratorium On 24 March 2020, the The director bears the onus of Government inserted a new demonstrating that the debt incurred section into the Corporations was: Act 2001 (section 588GAAA) in the ordinary course of the ✓ granting temporary relief for company’s business directors of financially distressed companies. during the six-month period ✓ commencing 25 March 2020 Relief is provided as a ‘new safe harbour from the director’s before the appointment of an ✓ duty to prevent insolvent administrator or liquidator trading during COVID- 19’. 5

Safe Harbour and Voluntary administration 1 2 3 Why consider ‘Safe What is What is Voluntary ‘Safe Harbour’? Harbour’ or Voluntary Administration? Administration? 6

Practical considerations for Directors Stay informed about the company’s financial position and available support Maximise cashflow by revisiting credit and debt arrangements and seek support from financiers, landlords, utility providers where appropriate Proactively manage cost base, working capital and supply chain Ensure the company is keeping appropriate financial records and take care with dividend decisions Obtain insolvency advice from experienced practitioners early Devise and implement plans for post COVID-19 7

Questions?

For further information contact: Gavin Stuart | Partner (02) 8281 7878 gstuart@bartier.com.au To subscribe visit – www.bartier.com.au @Bartier Perry @BartierPerryLaw Bartier Perry Bartier Perry Pty Limited is a corporation and not a partnership.